RollingStone | The great mystery story in American politics these days is why, over
the course of two presidential administrations (one from each party),
there’s been no serious federal criminal investigation of Wall Street
during a period of what appears to be epic corruption. People on the
outside have speculated and come up with dozens of possible reasons,
some plausible, some tending toward the conspiratorial – but there have
been very few who've come at the issue from the inside.
We get one of those rare inside accounts in The Payoff: Why Wall Street Always Wins, a
new book by Jeff Connaughton, the former aide to Senators Ted Kaufman
and Joe Biden. Jeff is well known to reporters like me; during a period
when most government officials double-talked or downplayed the Wall
Street corruption problem, Jeff was one of the few voices on the Hill
who always talked about the subject with appropriate alarm. He shared
this quality with his boss Kaufman, the Delaware Senator who took over
Biden's seat and instantly became an irritating (to Wall Street)
political force by announcing he wasn’t going to run for re-election. "I
later learned from reporters that Wall Street was frustrated that they
couldn’t find a way to harness Ted or pull in his reins," Jeff writes.
"There was no obvious way to pressure Ted because he wasn’t running for
re-election."
Kaufman for some time was a go-to guy in the Senate for reform
activists and reporters who wanted to find out what was really going on
with corruption issues. He was a leader in a number of areas, attempting
to push through (often simple) fixes to issues like high-frequency
trading (his advocacy here looked prescient after the "flash crash" of
2010), naked short-selling, and, perhaps most importantly, the
Too-Big-To-Fail issue. What’s fascinating about Connaughton’s book is
that we now get to hear a behind-the-scenes account of who exactly was
knocking down simple reform ideas, how they were knocked down, and in
some cases we even find out why good ideas were rejected, although some
element of mystery certainly remains here.
There are some damning revelations in this book, and overall it’s not
a flattering portrait of key Obama administration officials like SEC
enforcement chief Robert Khuzami, Department of Justice honchos Eric
Holder (who once worked at the same law firm, Covington and Burling, as
Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.
Most damningly, Connaughton writes about something he calls "The
Blob," a kind of catchall term describing an oozy pile of Hill insiders
who are all incestuously interconnected, sometimes by financial or
political ties, sometimes by marriage, sometimes by all three. And what
Connaughton and Kaufman found is that taking on Wall Street even with
the aim of imposing simple, logical fixes often inspired immediate
hostile responses from The Blob; you’d never know where it was coming
from.
